iPerks: Apple, Like Others, Takes Steps to Woo Employees

According to an article last week in The Wall Street Journal, Apple CEO Tim Cook has brought something to the company that many employees may not be familiar with: perks.

These perks, according to the article, include new discounts on Apple products, a program that matches employees’ personal charitable contributions up to a set amount, and “Blue Sky,” which gives small groups of employees a dedicated amount of time to spend on their favorite engineering projects. Cook has taken other steps to make Apple’s workforce feel more valued — such as praising employees at public events and trying harder to retain individuals who get outside job offers — the Journal noted.

How effective are these perks, and what should companies take into account when deciding which menu of perks to offer?

Seeding the Innovation Engine

Peter Cappelli, director of Wharton’s Center for Human Resources, describes Apple’s Blue Sky benefit as an example of a perk that is “tailored to the type of entrepreneurial, initiative-taking employee that most companies would want to keep. It also counters a key Google work arrangement,” he suggests, referring to Google’s 20% Time, a program in which Google employees are allowed to spend one day a week on projects of their choice that are outside their normal job responsibilities.

What’s key about initiatives like Blue Sky and 20% Time is that they are “tapping into people’s intrinsic motivation to work in these types of environments,” adds Wharton management professor Nancy Rothbard. The company clearly “has trust in its employees and values them as thinkers, creators and innovators. By seeding that innovation engine, the company is inspiring employees’ passion about their work. If one of their ideas turns out to be a blockbuster, then it’s a win-win for the company and the employee.”

The downside to this kind of perk is that companies may have to hire more people to handle the regular work load, Rothbard notes. “Otherwise, you are asking the person to do more work for the same salary.” If the company does not intend to bring in more help — “if the extra time the company is offering is fictional — then employees will rightly become frustrated.”

Wharton management professor Matthew Bidwell wonders how well Blue Sky can be implemented at Apple, which has “a much more tightly controlled system focused around a relatively small and integrated number of products” — a different model from Google’s where the “approach has often been to ‘Let 1,000 flowers bloom.’ It will be interesting to see whether Apple can reconcile [its culture] with a more bottom-up system.”

According to Wharton management professor Adam Cobb, many of the innovative ideas Google employees have come up with “have left the firm. There is a whole industry of Google start-ups, but I don’t think Google sees this as an issue. The company wants to be known as a place where really smart people are doing innovative things. It’s their identity.” At Google, Cobb adds, many of those innovations revolve around software, whereas at Apple, “the innovations are more about product design or functionality for a specific technology.”

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Cobb also speculates that Apple’s new openness to perks may be because “they perceive that they are losing out on good job candidates to Google and other similar firms, or that they are having a harder time recruiting and retaining people. So [these perks] may be a way to potentially narrow that gap.” Tim Cook “apparently isn’t trying to be Steve Jobs. I can appreciate that. He seems to be viewing human resources as an area the company could improve on. It shows a different attitude toward employees.”

Blurring the Line

In addition to the benefits recently adopted by Apple, employee perks can include everything from fitness centers, free gourmet meals and on-site dry cleaning services to child care, an in-house doctor and free commuter shuttle buses.

Yet perks such as these can be doubled-edged, as many observers have noted. “Beyond the basics, work-life balance is a big deal,” says Cappelli. “The problem is that a program alone rarely creates a good balance, so the culture has to fit with it.” The examples cited above “are really ways of helping to accommodate the fact that the employer expects you to be there all the time.”

“It’s a life style choice,” adds Cobb. “These companies have created a version of the old company town. So yes, these initiatives may seem like perks, but they [also point to] an ethos of crazy working hours. The company becomes the central institution in your life. It’s not your family, not religion, not the broader society. There is a real blurring of where one’s personal life begins and where it ends. That may be perfectly acceptable to some people.”

Bidwell agrees. “A lot of perks are about helping people work harder. ‘Come to work, and you need never, ever leave.’” But perks can also be motivating, he adds. “If there is a broad sense that your employer cares about you and is looking after you, this feeds through to a certain loyalty to the company. Psychologists talk about the strong norm of reciprocity. Employees [who get perks] feel they should reciprocate with extra effort.”

In general, says Rothbard, perks that are tied into a company’s strategy — such as Blue Sky — are the most successful. “Perks that are not tied into strategy can become marginalized and less effective.” For example, having a doctor on site can be strategic because it means that employees don’t waste hours during the day sitting in a doctor’s office. An example of a wasted perk would be offering flextime arrangements for employees but then setting up, or allowing, core meetings at times when employees on flextime are not there. “So if people really care about their career in the organization, they won’t be able to take advantage of that perk,” says Rothbard. “Flextime can be tied to strategy, but it has to be aligned with” implementation in a way that allows employees to actually use the benefit.

Perks can also show that a company is interested in a diverse workforce, one with employees who might have different needs than single people without kids who live and breathe Apple, says Rothbard. “Restricting the talent pool to a certain subset of people can make it difficult for a company to meet its needs for high-level talent.”

Wharton accounting professor Wayne Guay says that “perks work best when they are something that the employees value, but cannot buy themselves” or can’t buy as efficiently or easily. “A good example of a cost-efficient perk is health insurance. Buying insurance for a large group of employees allows for the pooling of risks, and can be obtained more cost effectively than if each employee went out and purchased his or her own insurance.” Perks also work well “when they are set up so that the company gets a tax deduction for the expense, but the employee does not have to pay tax on the perk.”

Allowing employees a few weeks to pursue an engineering project is a good perk, Guay adds. “It is probably something that many Apple employees value, but they cannot ‘buy’ this opportunity easily outside the company. And I assume that Apple is the beneficiary of these side engineering projects — that is, they are projects to develop products or software that may add value to Apple.”

As for stock options or stock grants, which many companies — including Apple — offer some employees, “they are just part of the compensation package, and are not perks because they simply provide the employee with the possibility of a monetary payoff.”

According to Cobb, the biggest benefits — and the two that matter the most — are health care and retirement. “Those are what drive employee satisfaction,” especially now that fewer companies are offering comprehensive health care coverage.

Pumped Up

Although the Journal article reported that Apple’s Cook “may be open to letting employees take sabbaticals,” Rothbard says that “sabbaticals are still pretty rare. Like Blue Sky, the idea is to recharge and refresh” an individual’s motivation and creativity. Rothbard cites ongoing research by Wharton management professor Martine Haas on peripheral knowledge — knowledge that is drawn from other contexts and related to the job at hand, or, in the case of employees, infused into one’s core tasks. Haas’ research, Rothbard adds, suggests that people can become much better innovators through incorporating peripheral knowledge. A classic example is the Reebok pump shoe which, two decades ago, merged some elements of medical technology — including the air pressure pump — into a path-breaking new basketball shoe.

Bidwell cites another benefit of such perks as yoga classes, free meals and free shuttle buses: “They are good for building networks in the organization. The more you can get people to socialize outside of work but with their work colleagues, the more they will meet people from other departments. That has to be good for the company.”

Bidwell isn’t sure that many of the perks offered do much to attract or retain employees. “Would you really stay at a job because they did your dry cleaning? My sense is that in many of today’s companies, people are looking for opportunities to build their careers and work on interesting and impactful projects. That trumps everything else.” Adds Cappelli: “I don’t think the idea behind retention is that employees are actively shopping and comparing the dollar value of what they are getting from each option. The idea is to keep them from shopping, in part by showing concern and in part by offering arrangements that are tailored to the specific needs of the people you want to keep.”

Apple’s Blue Sky initiative “is a good way to harness energy and initiative on the part of employees,” Cappelli states. “It may help retain them as well, at least until they figure out whether their idea is good enough to form the basis of their own company.”